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Post-Termination Restrictions: The UK Courts' Strict Approach

Employers contemplating placing post-employment restrictions on their employees in the UK should consider a series of recent court opinions adopting a narrow review of such limitations. As these opinions have made clear, it falls to the employer to ensure that the restrictions protect its legitimate business interests. If the restrictions go too far, are unclear or are not appropriately tailored to the circumstances, the employer seeking enforcement will likely find little relief in the courts, leaving the employee free to compete, interacting with former customers and clients, subject, of course, to confidentiality obligations.

In Bartholomews Agri Food Ltd. v. Thornton,1 the High Court in London followed this strict approach, reminding employers that restrictions must be considered at the time they were entered into, not the time that they are invoked. Bartholomews, an agricultural merchant, hired Mr. Thornton as a trainee agronomist in 1997. The employment contract signed at hire included terms and conditions common to all employees, including a post-termination restriction, which sought to prevent Mr. Thornton from dealing with a wide range of clients for six months after his employment ended. It also included a provision—unusual under English law—that Bartholomews would continue to pay Mr. Thornton his full remuneration for the duration of this restriction even if he had started a new job.

The High Court said the restriction was not enforceable because:

It had to be assessed at the time it was entered into—1997—when Mr. Thornton was a trainee agronomist with no experience and no customer contacts. The restriction was thus "manifestly inappropriate" for such a junior employee.

It was far broader than reasonably necessary to protect legitimate business interests as it applied to "all customers" of the Bartholomews Group, regardless of whether Mr. Thornton had knowledge of those customers or worked for them. Scrutinizing the Group's client base, the Court noted that Mr. Thornton was responsible for just over 1 percent of the Group's turnover and should not be restricted from dealing with the other 98-plus percent.

The provision that Bartholomews would continue to pay Mr. Thornton during the restricted period did not save it. Indeed, the judge stated that it was contrary to public policy to purchase a restraint; there is a public interest also in competition and the proper use of an employee's skills.

What should Bartholomews have done? They should have:

Tailored the restrictions to Mr. Thornton, and not relied on common terms applying across the board, from junior trainees upwards.

Ensured the restrictions were absolutely clear given that any ambiguity will typically be construed against the employer. Here, for example, the Court was critical of the failure to define "confidential information" properly, or to limit the group of restricted customers.

Ensured that the restrictions went no further than necessary to protect legitimate business interests, analyzing, for example, what information Mr. Thornton had access to, how quickly it would become "stale," which customers he dealt with, and in what geographical area.

Avoided additional payment for the restrictions, which can offend public policy in the UK.

This case reminds us that it is a good idea to audit terms of employment regularly (annually is suggested), and certainly when employees are promoted, change roles or take on new duties. Usually, the safest route is to ask the employee to sign a new contract. If an employee embarks on a project that entails access to a high level of confidential information and clients, this may call for additional agreements dealing specifically with confidentiality, intellectual property and/or post-termination restrictions, carefully tailored to cover the individual employee, the situation and the risks. Employers who fail to do this do so at their peril.

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